Is the German utility business model dead or dying? This outcome would at least appear credible given the conclusions emerging from the 2nd Inverter and PV System Technology Forum 2012, held recently in Berlin.
With the country set to phase out its nuclear generation capacity, to be replaced with a major investment programme in renewables, it would seem that the growing emergence of domestic PV will skew the current – largely centralised – electricity production scenario.
Indeed, according to trade group the German Solar Industry Association (BSW-Solar), further solar expansion in Germany will see its share in the country’s electricity mix increase by 70% by 2016 from around 4% this year. Furthermore, BSW-Solar believes, by 2020 the solar industry is to increase its share of electricity consumption in Germany to more than 10%.
According to new analysis from IHS iSuppli Germany is nonetheless likely to lose its place as the world’s top PV market in 2011, with installations during 2011 expected to decline to 5.9 GW, down 20% from the 7.4 GW seen in 2010.
Dr Henning Wicht, director and principal analyst for PV at IHS, explains that installations in the country stalled in the first half of 2011, and while there was a second half recovery it was insufficient to generate growth for the whole year.
Nonetheless, the rapid increase in solar power – and therefore the rising volume of locally produced electricity being fed into the grid – is posing huge challenges to the operators of both plant and grid. Responding to these challenges, inverter manufacturers are improving the communications and energy management capabilities of these devices, which will potentially allow a significant proportion of naturally occurring volatility to be effectively smoothed out.
However, despite the worldwide increase in new PV installations this year, component prices in the solar supply chain are largely on the decline. The weak demand in Europe will lead to further price battles in 2012, IHS believes, with the primary field of contention being module and polysilicon prices. Worldwide demand is expected to pick up by April 2012, driven by demand in Europe as well as by supportive local programmes coming online in China and the emergence of new markets such as India.
Strong in China
In the inverters sector – which has proved more resilient to the pricing shocks that have characterised the module market – quality has continued to command a price premium. But, backed by government policies designed to promote clean energy and a strong financial upside that encourages investment, shipments in China are set to nearly quadruple within four years, according to IHS iSuppli.
Inverter shipments in China will amount to 5.5 GW by 2015, equivalent to a compound annual growth rate of 31% from 1.4 GW at the end of 2011. Growth this year was particularly energetic as shipments soared 117% from 657 MW last year. The market expansion will amount to an impressive 85% to 2.6 GW next year, after which more modest increases will take place.
IHS argues that the growth of the Chinese inverter market during the next four years will boost the country’s standing in the worldwide solar inverter space. In 2010, the country had only a 3% share of global PV inverter shipments, compared to 42% for Germany, 22% for Italy, 7% for the Czech Republic, 6% for the US and Japan, and 4% for France. By 2015, however, China will be expected to account for 13% of the market – a substantial increase.
A Favourable Market
A major supporter and notable driving force behind Chinese PV inverter growth is the national government. Indeed, three directives were enacted in 2011 alone by the state-controlled National Development and Reform Council that will benefit the domestic PV inverter segment.
Financial considerations also are a powerful incentive. Compared to the solar cell and battery module segments, for instance, PV inverters in China are not subject to as much price pressure, representing a much smaller share of the cost of the entire PV system – only around 7%. The number of domestic inverter companies is also fewer than those of the batteries and PV cells sector, and inverters enjoy better gross margins compared to other components.
Among local inverter manufacturers, Sungrow Power Supply Co Ltd is one of the few players to have acquired substantial market share, with more than 40% of the domestic inverter space, exceeding even the reach of foreign firms such as US-based Emerson.
China’s utility market last year accounted for 54% of total domestic inverter revenue, followed by the commercial market at 42% and the residential segment at 4%. Inverter output ranging from 10 kW to 499 kW took a majority share of the market, trailed by inverters larger than 500 kW. At the same time, vendors like Sungrow are developing larger-output power inverters because of higher efficiency and lower cost per watt.
Meanwhile, IMS Research’s new report: PV Inverter Customer Opinions & Requirements Survey reveals a number of interesting trends for PV inverters in the future as well as reasons behind buyers’ choice of supplier and product.
Whilst there was very strong brand preference for Western suppliers of inverters, with SMA Solar Technology confirmed as clear leader for example, many customers indicated that they trusted Chinese brands too, with those in Italy and the UK being the most accepting. Despite this, the survey found that most customers still prefer Western inverter suppliers and had several demands for better products.
Commenting in the report, co-author and market analyst Cormac Gilligan said: ‘The most important product feature for string inverters was having more MPPT channels and a wider MPP range. Whilst central inverter customers also want this, they see improved system monitoring and fault detection as of ultimate importance to them’.
The ongoing trend of building large installations using three phase string inverters was also evident from the survey and more than 70% of respondents indicated they would consider using a string inverter in PV systems over 750 kW. In fact, more than 30% said they would use string inverters to build MW-sized projects.
Nearly 70% of customers wanted monitoring diagnostics right down to the string level, with 15% wanting to monitor each panel individually. This appears to show a great opportunity for panel-level electronics and monitoring.
Although customers were expecting better-performing inverter products in future, with more features and higher efficiencies, most expect prices to fall over the next three years with most expecting a 20%–30% reduction, IMS reports.
‘Nearly half of all customers said that they determined their inverter price based on their overall system budget. With module and system prices falling rapidly, this inherently puts more pressure on inverter prices to fall too,’ concluded IMS’s Gilligan.